Tissue regeneration diminishes with age, concurrent with declining hormone levels including growth factors such as insulin-like growth factor-1 (IGF-1). We investigated the molecular basis for such decline in pancreatic β-cells where loss of proliferation occurs early in age and is proposed to contribute to the pathogenesis of diabetes. We studied the regeneration capacity of β-cells in mouse model where PI3K/AKT pathway downstream of insulin/IGF-1 signaling is upregulated by genetic deletion of Pten (phosphatase and tensin homologue deleted on chromosome 10) specifically in insulin-producing cells. In this model, PTEN loss prevents the decline in proliferation capacity in aged β-cells and restores the ability of aged β-cells to respond to injury-induced regeneration. Using several animal and cell models where we can manipulate PTEN expression, we found that PTEN blocks cell cycle re-entry through a novel pathway leading to an increase in p16ink4a, a cell cycle inhibitor characterized for its role in cellular senescence/aging. A downregulation in p16ink4a occurs when PTEN is lost as a result of cyclin D1 induction and the activation of E2F transcription factors. The activation of E2F transcriptional factors leads to methylation of p16ink4a promoter, an event that is mediated by the upregulation of polycomb protein, Ezh2. These analyses establish a novel PTEN/cyclin D1/E2F/Ezh2/p16ink4a signaling network responsible for the aging process and provide specific evidence for a molecular paradigm that explain how decline in growth factor signals such as IGF-1 (through PTEN/PI3K signaling) may control regeneration and the lack thereof in aging cells.